Market Segmentation, Targeting and Positioning

Chapter 9MR1100

Segmentation Is:

• Placing prospective buyers into groups (segments) that:– 1) Have common needs &– 2) will respond similarly to a given set of

marketing actions.

Why Segment a Market?

• Organizations have limited budgets. Because of this coupled with the need to maximize profits or maximize shareholder value, most organizations have to make choices.

• Picking one or a few key segments to target sales allows organizations to channel their scarce resources most effectively.

When to Segment a Market• You should segment your market only if in doing it you can either:

– Increase sales– Increase profit or– Increase Return on Investment (ROI)

• Organizations often achieve this by:– Selling a single product to several markets – Selling baking soda to bakers and

baking soda to athletes as deodorizer.– Selling several products to several markets – usually the domain of larger

firms – car companies make different models for different types of markets/consumers.

– Mass-customization – this is a new trend that harnesses the power of logistics management and information management systems in such a way that companies can build a product to meet an individual’s taste while at the same time carefully control the costs of doing this.

Steps in Segmenting and targeting markets (1)

Form Prospective buyers into SegmentsDo so only if:

you can increase profit/ROI by doing it; only if you can clearly form segments that contain people with similar needs. The difference between the segments are substantial enough to warrant the segment. It is feasible – the cost of reaching the segment is less than the potential revenue

received from that segment.

Ways to segment a consumer market: Region Family Size Lifestyle Potential Benefits Offered Usage Rate

Steps in Segmenting and targeting markets (1)

• Ways to segment an organizational market:– Location– SIC code– Number of employees

Steps in Segmenting and targeting markets (2)

• Form Products to be sold into groups.

– Break products into categories that match buyers needs

– Eg: Skidoo offer 7 lines of snowmobile models to meet every taste.

Steps in Segmenting and targeting markets (3)

• Develop a Market Product grid and estimate the size, growth, competitive position, cost of reaching each market, as well as assessing the organizations objectives.

– Choose a segment or segments that best suit the organizations needs.

Steps in Segmenting and targeting markets (4)

• Take Marketing Actions to reach the target markets

– There are two basic stratagies to sell products in a competitive environment.• Head to Head - Direct competition, comparing your product with

the competitors on similar attributes. Duracell-Energiser• Differentiation - Emphasising differences among your products

and others. Stress unique aspects of the product.

Steps in Segmenting and targeting markets (4)

Perceptual maps give a 2 dimensional view of 2 product attributes relative to other competitive products. Light taste

Heavy taste

Bitter Mild

The PM Allows Marketers to define the Competition.

Analyzing the Market

• Using Survey questions to reveal more than the obvious.– Cross-Tabulation: Comparing the answer on one

survey question to another.• Eg:

– Q1) How old are you 10-40 41-80– Q2) Where do you live City Country– Look at the answers to each question and ask do younger

people have a propensity to live in the city?